Environment Minister
Greg Hunt
has held private talks with independent senator
Nick Xenophon
about changes to the Direct Action carbon policy that would allow access to a small number of ­international carbon permits while keeping the balance in favour of ­domestic abatement.

The offshore permits would provide a cheap way for companies ­participating in the $2.55 billion ­Emissions Reduction Fund to top up their emissions ­reductions should they fall short of promised targets.

Senator Xenophon confirmed to The Australian Financial Review Mr Hunt was “willing to talk" about a shift in the government’s policy, and discussions were ongoing.

“I think the design needs to include some international permits . . . we both genuinely want to achieve the same outcome which is to maximise possible abatement in the most efficient way possible," Senator Xenophon said.

“I think if it’s designed and ­implemented well, and implemented properly, direct action can be a very ­efficient way of abating carbon."

Verification needed

Senator Xenophon said international ­permits would have to be verified, to ensure the abatement was credible.

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“There has been no change in policy and there’s no plan to change the ­policy," he said. “As the white paper made absolutely clear, the focus for the ERF is on domestic ­abatement."

Australian Industry Group chief executive
Innes Willox
said international permits were “credible, copious and cheap. We’re hopeful that good ­policy sense will prevail and the government and parliament will come to the same conclusion."

Without the global permits, business says, the attraction of bidding for a ­government contract under the ERF is much reduced.

Mr Hunt’s negotiating position is constrained by a series of criticisms made of international permits in the context of the battle against the former government’s carbon tax by Prime Minister
Tony Abbott
.

“It looks a lot more like a get-rich-quick scheme for foreign carbon ­traders than it does a realistic attempt to reduce emissions here in Australia," Mr Abbott said in 2011.

Labor has said it will fiercely criticise the government if it performed a back flip on the permits under Direct Action.

Even with the support of Senator Xenophon, the government will not be able to pass direct action through the current Senate without the support of Palmer United Party senators. Leader
Clive Palmer
has made his party’s vote conditional on the government’s ­support of his own dormant emissions trading scheme proposal, which he is unlikely to receive.

But Senator Xenophon’s position on direct action is crucial as he could take leadership of the issue on the cross bench. “Once I’ve reached my position I need to convince my colleagues on the merits of the proposed amendments and the effectiveness of the design," he said.